UK inflation hit by energy costs

UK inflation was unchanged in January compared to December.
Housing made the largest contribution to the annual rise of 2.7% (CPIH) at 0.52%. This includes the impact of higher water, electricity and gas bills and the Council Tax. Motor fuel made the second largest contribution at 0.43% reflecting the further dollar rise in oil prices partially offset by the strength of the pound against the dollar. The third highest contributor was recreation and culture at 0.41%. These are domestic charges for entry to events and places of interest. These three items accounted for one half of the rise.

Other commentators may tell you motor fuel contributed to a fall and recreation contributed to the rise, as they compare the rate of increase this January with the rate the preceding January. This however can be misleading, as what matters most is the actual contributions of each item to the total in the month in question.

Those commentators who keep telling us the inflation is all to do with a fall in sterling should be asked why they hold this view when the three largest contributions had nothing to do with sterling, or in one case benefitted from a rise in sterling against the dollar in recent months.

63 Comments

There are many reasons for price increases. Government legislation for instance.

Government has legislated that all private business must provide pensions. This is an additional cost that must be paid for by the consumer. Also government regulation. Regulation can be a force for good, but too often it is used as a means of generating additional revenue. Licenses and paperwork for things that do not cost government little or nothing but are charged to the user. eg Charges from Companies House. £15 just for me to tick a few boxes on a web page ! Where is the human input, apart from my own, that warrants such a cost ? It should be FREE !

Dear Mark B, Re charges eg from Companies House for ticking a few boxes on a web page: I think £15 is very little for everything that has to be paid for in relation to that one filing, online: that record (actually, multiple fields) needs to be accessible (as appropriate), over time, online, and kept. The electricity costs of keeping the Companies House servers running is extremely high: a huge volume of data held within highly complex databases, which have to be maintained, back-ups kept. Just cooling the data centres so they don’t get too hot and go phut is one of the biggest consumers of electricity.
A study five years ago reported that IT – the digital economy- uses one tenth of the world’s electricity, and I am sure the figure is higher now,https://www.theregister.co.uk/2013/08/16/it_electricity_use_worse_than_you_thought/
This issue has been a big headache in IT for several years now. Iceland has been doing quite good business as a place for big data centres, because it’s got a very lot of hydro-electricity and it’s colder, so cooling isn’t as expensive.
I almost posted about this yesterday re Bitcoin.

Alison, Companies House is hardly Facebook, is it? I have just downloaded an annual return and a small company accounts, of 67.6kb and 49.6kb respectively; they were both stored on Amazon AWS. Peanuts.

Forthurst (and apologies to host for burdening his postings box), may I disagree? As you say, Companies House is not Facebook, but the databases and servers runnning the records are far from trivial, and require significant power to run, and to respond to the hundreds of thousands of queries submitted, I guess daily (2.1 billion ‘free’ – ie for no payment – searches 2016/17 yr). The speed of search/retrieval is high, so there must be some beef in those servers. The information in the annual return (simple example) is a set of multiple records, collected, stored, and available for search and retrieval (as appropriate); the PDF is generated from that, but those individual fields need to be maintained.

I still think £15 is not much to pay for an annual return for an institution and service which is so important and valuable to economy and society. Equally it is important the fee is not high, otherwise filings would fall off (etc).

Plus huge fines if you are late by a day, perhaps because you were ill, some papers went missing or perhaps you were too busy with gender pay reporting an absurd tribunal claim or some other total idiocy forced onto to you by idiots like May or the litigation racket.

They we have the apprentice scheme and endless other tax increase. Hammond’s 20 % increase in IPT insurance tax might be 1-2% on inflation for some, the attacks on the gig economy and UBER, the endless employment tribunal costs ……

The government is at least 90% of the problem and May’s PC. socialist, high taxing interventionist government is particularly bad.

Yes big increases on the way on top of what is already an exorbitant and unfair tax. This Government have cut council budgets in England to the bone whilst passing the responsibility of social care onto them. Meanwhile the Chancellor could find an extra 4 billion down the back of the sofa to bung to Scotland, Wales & NI in the budget in addition to the Barnett Formula. Wonder if their council tax bills will be going up by 5%.
Why do UK Governments of all colours, even this ‘Tory’ one, treat England as nothing more than a cash cow for the benefit of everywhere else except England?

No it has not. Local govt receive CIL and NHB. That is worth a fortune especially for councils who built urban ghettos. It made up for the cut in grant to force councils to build.

Then we have the add ons of adult social care and the add on of flood defence then the add on to pay private companies to look after communal green areas.

Councils need to be forced to unitary, cut football salaries for director of services who in the main are full and not up to the job, stop PC drivel and overall be far more efficient. Change the clique of cabinet councillors who treat council areas as their fiefdoms for corrupt practices.

I made my comment about this on the last thread; I will just say that before attributing any change since the referendum on the result of the referendum it is necessary to look at what was happening before the referendum, and in this case CPI had started to lift off from close to zero about nine months before the vote.

Denis, stick with the index the government is trying to bury, RPI. There are many obligations that are coupled to RPI. CPI and its variants assume that households will trade down and accept a lower standard of living and like it.

“2003 was also the time when Brown changed the inflation target he gave to the MPC from one expressed in terms of RPI-X to one expressed in terms of CPI, which is actually the EU’s HICP.

And to be fair to a man who is often vilified over matters for which he had no or only partial or unclear responsibility, King did quietly question the wisdom of that change in this speech in January 2004 … “

I noticed that air fares were identified as one of the contributors (within the ‘leisure’ category). I’m surprised that going abroad by air for a holiday by air is considered to be essential expenditure and why it should be included in the calculation at all.

They have not calculated in any of the financial figures of the numbers who use it and deduct the numbers who do not use it. I drink foreign cans of beer for instance as an act of patriotism so as not use up inflationary UK rainwater. Also beer is a food.

Most of inflation come from deliberate government actions, the expensive climate alarmist energy religion, the 5% rises in council tax, the motorist mugging agenda (if you dare to drive a 21 MPH), the common EU import tariff, the cost of complying with endless daft regulations, the insane HS2 project, bonkers employment laws, the litigation culture, the over complex tax system, the gender pay drivel, payments to the feckless and work shy, a lack of any competitive banking and many other total other lunacies. The 20% increase in the rip off insurance tax to 12% (from Hammond), the 15% SDLT, the taxation of non profits on landlords and thus onto tenants rents …..

The government is the problem as usual. May and Hammond are misguided tax borrow and piss down the drain & big government dopes. Corbyn and O’Donnell would of course be even worse.

Could we for once have a pro-growth, real Conservative government please. We have had far too much idiotic socialism from Heath, Blair, Brown, Major, Cameron and May. We even had rather too much from Thatcher. But at least she actually won elections.

Cut taxes, grow the tax base and fire the many government parasites who do little of any value. At least half of them.

Totally agree. 6 million people working for the state, including politicians, who unlike us have the luxury of having their gold plated pensions provided for by the rest of us mugs who can only dream of such pensions.

Energy costs intrude almost everywhere which is why I cannot understand the UK’s sclerotic take up of shale gas and oil. If it is engendered by a fear of the Nimby brigade or not wishing to admit that windmills and Chinese/French nuclear power are destroyers of manufacturing, I can understand it , but have no sympathy for the inept politicians who go along with it. If the same quality of civil servants advise on energy as advise on financial matters and membership of the EU, then we will be paying through the nose for energy ad infinitum.

OPEC and the Russians have today announced that they are maintaining their production cutbacks despite stockpiles falling by 80% to the lowest levels since November 2014.

The “Power of Siberia” pipeline that will take Russian gas to China is set to start pumping late in 2019 and I believe the Russians,despite US opposition, have reached memorandum of understanding to build a pipeline from the large Iranian gasfields they control to supply India via the Chinese-controlled Pakistani port of Gwadar.

Where do we think European energy prices are going?

The above is just one small example of the Eurasian integration project that over the next couple of decades will probably turn Eurasia in a vast Sino-Russian fortress.In this context EU integration isn’t even worth thinking about.

@Mitchel
The world is not about to start WWIII .Despite all the Fake News, if a Briton, American , Russian or Chinese person were stranded in need of help in any of the countries of those people, the authorities and indeed ordinary people would help them, not because they were ordered to, but because they wished to. Important! Fear not

Of course they would on an individual level that doesn’t alter the fact that China and Russia are seeking to bring trade and energy routes across their own or allied territory where they can be protected militarily and not blockaded.And there’s plenty of flashpoints on the periphery of Eurasia that could lead to a major conflict and where conflict is already under way stoked by the US.And personally I’m not afraid-I’m all for a multi-polar world

In the case of the Scottish government it is ideology, ideology, ideology. Even though their shale is on the whole different from that which only in their worst nightmares produces catastrophe, they still will not accept progress. Nor science. Couple that and a non-actively responsive NHS and Scotland has had it. It imports American LNG. Maybe they love Trump

I hear reports on local radio today that West Berkshire will be increasing Council tax by 6% for this next financial year, starting in April 2018.

Usual excuses given, Government cuts etc, etc.

Just resigned to the fact now that Government and Local Authorities can effectively take part in legalised theft, because you have absolutely no option but to pay, and pay for whatever they ask, even if you do not use many of the services they provide.
Yes fully aware it is a collective scheme and some benefit and others do not.

The cost of course includes for their very good pension schemes, although funnily enough they never seem to mention that fact.

It is the public sector that is helping to create the majority of inflation as currently officially calculated.
Then they alter economic policy which hits the private sector to reduce the inflation they have created.
Due to real competition in the real private sector (not multi national nor PLCs in cartels) prices have fallen in my experience in the last year.
Mainly due to internet companies delivering direct to you undercutting the traditional high street shops.

“Getting rid of border controls on trade thus depended on both the European customs union, and the European single market … ”

Then we have the Irish Prime Minister admitting that it will be “tricky” to avoid a hard land border in the absence of his preferred option, “a comprehensive free-trade and customs agreement involving Britain and Ireland”:

“EU member states will refuse to accept a Border that allows Ireland to be “an open gate without any control”.

An EU source told the Irish Independent that all other member states will insist on sufficient border controls and will take a hardline on protecting the internal market from smuggling.

The prime concern is preventing unauthorised goods and people getting into EU territory.

They must ensure “Ireland is not an open gate without any control – the EU will not accept that”, said the source.”

Well, of course at present Ireland is just such an open gate with no control but the EU has been prepared to accept the word of the UK government and Parliament that the UK will always use its best endeavours to make sure that the open gate is not misused, a promise which was enshrined in UK law through this 1986 Act of Parliament:

which inter alia approved the Single European Act and incorporated its provisions into UK domestic law; but now apparently the UK has become untrustworthy and any similar promise would be worthless, unless of course it was a new promise which somehow kept Northern Ireland in the EU Customs Union and the EU Single Market …

Oh, and if all this seems to be deliberately contrived to obstruct Brexit then that may be because it has indeed been deliberately contrived to obstruct Brexit, and it is worth recalling that all this kerfuffle revolves around the goods worth just 0.1% of UK GDP which are exported from Northern Ireland to the Republic.

Let England itself leave the UK and take up a status like the Isle of Man and Channel Islands..it would then be also outside of the EU..but leaving behind those other parts, Scotland and NI that voted to remain. Gibraltar also voted overwhelmingly to remain..London could be allowed to take up a city state status within the EU to suit financial services..problem solved with the least amount of upset to everyone.

Sad that you will lie to get your way Andy.
Will your children respect you or trust you when they find out.
Brexit is not making their lives worse.
Growth is up
Employment is up
Retail sales up.
Wage growth is up
Unemployment is down
More student came here last year than the year before
Etc
Remainers said the opoosite would happen.

One major contribution to inflation is taxes on businesses, along with regulations such as a higher Minimum Wage each year. The political climate is now such that it is difficult for the Conservatives to cut taxes because that is portrayed by the Left as cutting Public Services. However, we could cut Foreign Aid and stop giving so much to the European Union – then you can cut taxes like VAT which would help to make things cheaper whilst putting more money in people’s pockets. This would help boost revenues that could then be spent on the cash-strapped NHS and more Police; all of which would be popular with Voters.

In the meantime, the Left in the House of Lords and the Commons is trying to push through legislation by the back-door that will put newspapers out of business and undermine Britain’s free press- and damaging Britain’s Democracy into the bargain! You must MUST make sure, along with all other Conservatives MPs that the Left do not have their way with Section 40 and Leveson 2.

If you fail to stop Leveson 2, and are forced into custom-union shaped compromises over Brexit the Conservatives must call for a new General Election, put radical popular policies in the Manifesto so that they win outright (risk a Credit Rating downgrade and a little inflation to fund them. You CANNOT let the Left wreck our democracy!) . Then the new Conservative Government must undo the damage and repeal the democratically harmful legislation. When the Conservatives get back into power they can scrap foreign aid and EU contributions, along with Green subsidies to fund tax-cuts. These would turbo-charge the UK Economy so that other policies promised in the Manifesto can be funded from increased revenues (that will not cause inflation).

Yes, this is what it may well take to properly defeat the Left, along with some of their dangerous ideas like muzzling the Press.

I swapped my energy provider recently. My bills are down by £250 per year. More really, but you would never believe the figure and I’m embarrassed I did not change before.
So like my food bill which has gone down massively as I now use four separate online grocery providers…my personal economic development is greater than that of China. In light of this I did think to use 0.7% of my money giving in giving to an International charity but..well I have standards so no. The EU says I should give them some money. No legal reason, just that they wish it so.

Absolutely true: anyone can have lower energy bills if they switch their energy provider and can read a meter and use a pocket calculator. Similarly with internet ISP, mobile charges, etc etc.
I have to laugh when I hear the populist efforts of politicians complaining that people who don’t shop around for supplier have to pay more than those who do make that choice. Of course that’s the case! Just as people who don’t bother staying in credit with their bank pay overdraft fees, people who drive without care and attention pay higher insurance premiums, and those who do all their shopping at the nearest convenience store pay more for groceries and booze.
Except for the genuinely innumerate (for whom their teachers should hang their own heads in shame) an unwillingness to engage in life’s choices is irreponsible arrogance: it should not be rewarded.

Spare a thought for those of us having to use oil for heating. We only use a small amount of electricity so no point in switching provider. We get no good deal for dual fuel use and are governed by the price of oil which is expensive again. Tax should be removed totally from energy prices for heating and cooking. One of life’s essentials especially this year in Scotland which has been persistently cold, snowy and wet.

Inflation took off after teh Brexit vote and teh drop in the pound and has remained high at around 3 % ever since , Why is is not so high in the rest of Europe . Of course it ahs to do with teh loss in the value of the pound after the referendum.

Using domestic excuses 18 m0nths later still does not explain why, we ahve inflation nearly double of continental Europe

The degree of economic literacy indicated in Hans chr Iverson’s is unimpressive.

3% inflation is an excellent figure considering the size of the welcome and essential fall in the overvalued pound following the Brexit vote, the fact that we have full employment at the same time as having the lowest interest rates in British (and nearly all other major countries’), history, have been printing money right left and centre to cover a mind boggling budget deficit, have been raising the Minimum Wage, the National Living Wage and the State Pension apace and the global economy is expanding.

Even now inflation is within the target range, and a sizeable chunk of that is caused by a one off rise in Oil Prices.

But 18 months is still also a very short time for the effects of the sterling fall to have worked through. The 3% figure relates to price changes between January 2017 and January 2018. The pound only fell six months before the start of that date and currency falls rarely have any effect on shop prices for the first six months.

It will take at least another two years before the full effects of the Sterling fall work their way through. This is all part of the long overdue economic adjustment by which we can finally live within our means and export more, rather than providing the EU with a captive market for their exports which we buy with money they lend us.

The fall in the value of the pound saved the steel industry which, immediately before the Brexit Vote was due to shut down altogether, and has done the same for a number of other less well known businesses. It has also enabled many others to go from ‘surviving’ to ‘thriving’.

By the time we leave the EU in March 2019, infation here will be bhack near bang on the 2% target. I think about 2.3%, and in, my judgment that’s exactly where it should be and should stay.

There is nothing to be gained by putting the economy on the rack to squeeze out the last tenths of a % of inflation. 2% inflation on average, is just what the doctor ordered as an economic lubricant.

Why do governments think that more and more regulation and control is the answer to every problem? Why have they no understanding of motivation and incentives ? Why do they think they should lecture the rest of us on how to run our lives when they can’t even do their own jobs even remotely efficiently ? On time and within budget !!

Measured by results government are not elites, far from it. In fact the UK is a very badly managed country when compared to some I have experienced. Not to mention the huge salaries paid to management who actually only do half the job of an equivalent private sector responsibility. They don’t generate their money first as business has to do before paying themselves, so they are only doing half the job and should be paid accordingly. That’s how it used to be when Civil Servants were just that and were not well paid, but they had job security and a guaranteed pension at the end. Any fool can spend other peoples’ money.

I see Brexit as a huge kick up the backside for the political class by people who are downright angry about the decisions made in the last 40 years without their approval. They are not all low income, poorly educated northerners who misread that slogan on the side of a bus.

The cost of electric, gas and oil are inflated by the demands of environmentalists and climate change alarmists. Who when you know the assumptions that they use to to make their claims that we should inflate these commodities so as to reduce or even do away with their use it can be realised that they are being deceitful. In addition the predictions that they have been making for the last couple of decades or so are being exposed as false. On this basis it is time that these peddlers of armageddon should be treated with the contempt they deserve and we should cease wasting billions on following their demands. If we did the inflation figure quoted would be lower and we and all the poorer people of the world would see their standard of living rise.

This story from the BBC about EU Economic Growth being the highest for ten years in 2017, is, despite the Remainer joy being voiced at the BBC, less than thrilling.

Good luck to the EU for finally having a single year where its’ major countries have done as well as the UK’s being doing for decades, but the BBC seeks to pervert significance the story, by telling us that Germany and France grew by 0.6% in the Fourth Quarter.

It does however choose not to mention that the UK despite the alleged ‘crippling’ Brexit uncertainty, grew by 0.7% io the third quarter (the last quarter for which a reliable number is available). I bet the final figure for UK Q4 will also be 0.6%, the same as Germany.

And the UK manages to do this despite already having full employment, having outgrown the Eurozone for decades, and not having the huge well of unemployed people to draw on that Spain Greece, France ‘et al’ nearly all have.

About John Redwood

John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.